Long Beach-based Digital Performance (www.digitalperformance.com) is a company which provides a digital catalog of aftermarket automotive parts which it licenses to publications like Offroad.com and Recycler. The firm recently received $500K in early funding from Momentum Venture Partners, and we thought it would be interesting to hear how it is looking to grow its business. We spoke with Bill Kelley, VP of Marketing for the firm, to learn more about the company's industry and what it does. Bill was interviewed by Ben Kuo.
What is Digital Performance?
Bill Kelley: The company originated as a service provider to the SEMA industry. SEMA stands for Specialty Equipment Marketers Association. That means people who make cars go faster, look cooler, more convenient, etc. The companies that make things people put on their cars after purchasing from a manufacturer. The company started out as a service provider within the industry. As the company evolved there were more and more pressure to create e-commerce front ends. As the company attempted to do that and create an online store, it became painfully apparent that the structure of the industry was such that there were no industry standards to reference the parts sitting on vehicles.
Explain what that problem is?
Bill Kelley: What that means, is if you wanted to have a high performance, turbocharger kit for your vehicle--and let's say your vehicle is a 2004 Mitsubishi Eclipse--if you do a search across various websites to find a turbocharger kit for that vehicle, you find that everything about the description is addressed differently depending on manufacturer. Some might refer to the kit using an engine type and code that might be used by a manufacturer, the other might give you a year range, another might give you trim type, model type, or displacement, but there was not an absolute, consistent reference across the industry for the particular model, so that you could do a search and come up with all the results.
Sounds very confusing.
Bill Kelley: It is very confusing. Every one of these companies started out with some very creative fellow--an engineer, typically--making a part in isolation to solve a particular vehicle problem. Ultimate, they got into manufacturing that product. Because those ideas flow from creative individuals, where the T's are not crossed, the I's are not dotted, they only packed the product up with just enough information for third parties to sell it. So we started with what was being done on the other side of the business, the replacement parts side--where you go to get a headlight, or to replace spark plugs, the OEM replacement side. That side of the industry is very organized, because the same people who make the part to replace the broken part also supply auto manufacturers. We took a subset of information from the OEM side, and applied it to where it works in the performance aftermarket. In other words, we have brought structure to chaos in the auto aftermarket. We have done this hand in hand with SEMA, creating an industry standard as we go.
Because of the fact that these are aftermarket modification part, in some cases there are conflicts between parts and another being added, and in other cases they may be complementary and not conflicting, so obviously there's been a need for an organized way of categorizing parts and bringing that information together. That's where we found ourselves after almost six years of serving the industry. We realized we'd created a very large database of parts, and created a schema for coding parts that was suitable to virtually any application in the aftermarket. We realized we had something we could now turn around, and instead of using it within the industry for e-commerce, ended up creating a shopping guide that could go directly to consumers.
Why do customers use your product?
Bill Kelley: We have the opportunity to solve a problem that has haunted the industry for a long time. It's well known how poor the fitment information--that's an industry term--how poorly this is distributed and understood. Resellers within the automotive aftermarket will actually print out a return merchandise authorization on their receipt, so parts come shipped out ready to come back. There are reports that more than 22% of parts do not fit the vehicle they were purchased for, because of the lack of clarity, consistency, and so forth in description. There's a huge opportunity to take the fitment probability from 78% to 95%. That's why consumers see this as a big plus, and why web site operators see this as a big plus.
How are you backed and funded?
Bill Kelley: We were very lucky. It was just a coincidence that the president of the company went to a breakfast, and met Andy Wilson at Momentum. Momentum, in my experience, is very unique in the industry. I counted myself as very skeptical of the company at first. They company came in as an outside management firm, to help package up the company to attract a bridge round of funding, and help move the company towards venture funding. But, in fact, they did everything they said they were going to do.
How was it backed up until then?
Bill Kelley: The company was bootstrapped, the initial investment was quite small. The company from the first five years grew from the back bedroom to an independent company with eleven employees eighteen months ago. Now we're at 15 employees and running at about 200% the revenue rate of last year, very close to double.
Is that growth driven by your online business?
Bill Kelley: In fact, the online business is so young, we're just starting to get traction. One site is in beta test, and we've only just integrated into the other site, but we have two others queued up and several more behind that. Probably, by the end of the calendar year, our new shopping syndication program will probably be the dominant revenue source for the company. The reason it's only going to take until the end of the year is the database we've built, which now has 837 brands, turns out to be something very desirable to several large resellers and distributors in the industry. Frankly, we're very surprised by the amount of business in licensing our data. It turns out we're producing a lot of value in the industry, and are seen as the gurus of data, because of the fact that we have the data scheme that gives best fitment--and there are others in the industry who have tried to do to this in the past, and who generally have not done as well because of inaccurate data or incomplete data. There's approximately--and I'm guessing--6000 manufacturers in the market. When we say 837 brands, it sounds pretty impressive, but our goal is to be as comprehensive as possible, and would like to double the number of brands this time next year.
A lot of us here are car enthusiasts, and have gone through some struggles, where we've gotten the wrong types of parts from reading ambiguous descriptions, and found out the thing we bought doesn't fit. It's 5pm on Saturday, our car is on the blocks in the driveway, and we have to put the old things back in order to get to work on Monday. There's nothing more frustrating. All of us have personal motivation to make this a really great asset for car enthusiasts.